Boat Line 2004: Big Challenges, with Some Internal Tensions

The monthly meeting was canceled, but there is no shortage of
business news at the Steamship Authority these days, where revenues are
down, a new but poorly defined marketing push is under fire and fissures
between Nantucket and the Vineyard have grown wider.

And the monthly meetings keep getting canceled.

The December monthly meeting of the boat line was set for yesterday,
but the meeting was canceled because of the holiday season and a
reportedly light agenda. Three other monthly meetings were also canceled
this year - an unusual trend for the boat line, where heavy
business agendas are the rule.

The next SSA meeting is now set for Jan. 15. The location has not
been announced.

Preparing to move into a new year, chief executive officer Fred C.
Raskin spoke this week about the state of the Steamship Authority.

"The Steamship Authority is in good shape - as it has
been for many years," Mr. Raskin said. "We've suffered
some this year with low revenues based on the level of tourism and the
weather, but in this business we also know that both of those things
come out fine over time. We don't like raising rates and we have
some very big challenges going down the road and the challenges are to
reduce costs, but we are on that road," he added.

Rates will go up on both Island routes in January - the
increases will be modest on the Vineyard run, while the Nantucket run
will take a harder hit. A new 50-cent head tax will also go into effect
on the first of the year. Created through a special act of the
legislature, the tax is aimed at generating revenues for the port towns,
but it promises to be an administrative nightmare for the boat line.

"I've not been a fan of the head tax and I've said
this repeatedly, because it monetizes what has traditionally been a
family relationship," Mr. Raskin said.

But there is growing trouble inside the family.

At the November monthly meeting on Nantucket a crowd of islanders
lambasted the boat line for a little-known plan to allow J. Crew to hand
out catalogues during the annual Christmas Stroll weekend.

The J. Crew blooper was quickly pulled, but not before the boat line
board, during the tense meeting dominated by the subject, snubbed
longtime boat line governor Grace Grossman by refusing to second her
motions.

Vineyard SSA governor Kathryn A. Roessel repeatedly sided with the
mainland board members at the meeting, adding more space to the growing
divide between the two Islands over boat line issues.

The SSA business plan for the coming year includes:

* A new project to generate revenue through marketing and
advertising.

* A new contract with a private operator to run high-speed
ferry service between New Bedford and the Vineyard.

* A project aimed at converting the passenger ferry Schamonchi
to a private operation.

Purchased by the boat line three years ago for $1.7 million, the
Schamonchi has been an unending headache for the boat line, which loses
about $700,000 annually on the operation. Previously owned by the
Thompson family as a private ferry, the Schamonchi operates between New
Bedford and the Vineyard in the summer months.

Last year when SSA governors signed a contract with New England Fast
Ferry to run high-speed passenger service between New Bedford and the
Vineyard, the Schamonchi became a sore point. The boat line learned from
the state auditor that it would run afoul of the Pacheco Act, the state
privatization law, if the Schamonchi were replaced by private ferry
service.

After months of complicated talks with state officials, the boat
line found a way to make an end run around the Pacheco problem: convert
the Schamonchi to a private operation.

A lengthy request for proposals (RFP) went out recently, and at a
preplanning meeting last week two companies expressed an interest in
taking over the Schamonchi. The favored bidder is expected to be New
England Fast Ferry, because the terms of its high-speed ferry contract
are shaped around an incentive plan to have the private company run both
ferries. The boat line will pay the new operator an annual subsidy of
$250,000 for two years.

"The bottom line is that we want to keep the service; we just
don't want to lose $700,000 a year," Mr. Raskin said.

He reported that the fast ferry project is still on track, with the
first boat under construction at Derecktor Shipyard in Bridgeport, Conn.

Plans are also moving ahead to build a replacement for the ferry
Islander, and Mr. Raskin said he expects to see an update on the project
at the January boat line meeting.

Also in January Ms. Roessel is sponsoring another community forum
- this time to get feedback from Islanders about the marketing and
advertising plans for the coming year.

This year the boat line signed a contract with Carroll Advertising
in Boston to manage an array of advertising ventures, including a new
project to sell display advertising space on ferries and in boat line
terminals. For the first time, the pocket ferry schedules distributed to
customers will have advertising on them next year.

Another plan to launch a glossy high-end magazine has seen several
stumbles since it was first announced last summer. In an opinion piece
published in the Martha's Vineyard Times this week, Ms. Roessel
expressed some reservation about the magazine project - and the
whole advertising gambit in general.

"Since we entered into the Carroll agreement, things have not
gone smoothly," Ms. Roessel wrote.

On Jan. 7 Ms. Roessel will sponsor a discussion on marketing and
advertising at the regular meeting of the Dukes County Commission.

Mr. Raskin said the boat line plans to put out an RFP for the
magazine project. "We're going to see if there is any
interest in providing a turnkey operation - alternatively, we are
going to consider our own publication or whether to charge for the right
to place material on the boats, which would involve by definition no new
publication," he said, adding:

"We've been giving away our space and the question is
how is the best way to generate net additional revenue for promoting
that space."

It remains unclear just how much revenue will be generated by the
advertising ventures. The three-year contract with Carroll calls for the
advertising firm to pay the boat line 55 per cent of its monthly gross
billings. There is also a provision that allows the boat line to
terminate the contract if the billings do not generate $2,500 a month in
the first year, $4,500 a month for any consecutive four-month period in
the second year, and $6,500 a month for any consecutive three-month
period in the third year.

The conversation with Mr. Raskin ended on a final subject: the
mission of the boat line. Against a backdrop of an expanded board of
governors and an increasing presence of mainland interests on the board,
has the boat line strayed from its central mission to provide dependable
year-round service to the two Islands?

I don't think that has happened, nor do I think it
should," Mr. Raskin said.

"There has always been this defensive thing about the
Steamship Authority imposing on the communities. I think that should be
lessened now, and I think the needs of the Island travelers should come
a little more to the forefront," he concluded.